New market-manipulation rules help - but are useless without determined application

Conservative MEPs today cautiously welcomed a vote by the European Parliament supporting a proposed package of reforms to tackle insider-dealing and abuse of the markets.

But they warned new rules would only work in countering abuse such as the LIBOR scandal if they were backed by a determined and sustained effort from the EU and member states to crack down on rogue traders.

A plenary session of the legislature in Strasbourg voted through proposals for a regulation to introduce new rules on abuse, and to update existing ones.

Drawn up during three-way talks between representatives of the Parliament, EU Commission and EU Council, the report introduces stronger sanctions for companies breaking the law, including temporary bans and requiring member states to set the maximum level of fines up to a minimum of 15 per cent of turnover. In the most serious cases traders and firms could be banned from the markets.

To address the weaknesses revealed by benchmark manipulation scandals, including those involving LIBOR (London Inter-Bank Offered Rate), the transmission of false or misleading information will be made illegal.

Kay Swinburne, Conservative negotiator on the proposal, said: "I am wary of those who think the vote on this regulation is the end of the story.

"The original Market Abuse Directive has been in place for the entire financial crisis and during the many scandals of LIBOR and product mis-selling that we have seen across the EU in recent years.

"Having rules is not good enough. It has to be about effective supervision and enforcement, including prosecution."

The Conservative MEP for Wales said national authorities "on the ground" must make clear that abusive practices would not be tolerated. Fines needed to be set high enough to be a genuine deterrent.

And she cautioned: "Personally I am disappointed that we have not sought more punitive fines for market abuse across the European financial markets and it is difficult to see how the European banks found guilty of market manipulation by US authorities, who were fined amounts ranging from a hundred to a billion dollars, could be similarly fined under these new rules.

"It is time the EU as a whole enforced our market abuse legislation firmly and successfully prosecuted offending institutions and individuals."

She hoped Britain and others would use the discretion allowed by the legislation, and said: "They should go further to make certain crime does not pay with punitive fines and, where necessary, criminal sanctions. High profile prosecutions will prove a valuable deterrent."